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Materials Management Systems

• Introductions and Housekeeping

• What is materials management?

• Why study materials management?

• Manufacturing Strategies

• The Supply Chain Perspective

• Careers in materials management

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What is Materials Management?

The grouping of management functions supporting the complete cycle of material flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product.

APICS Dictionary, 8th Edition

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Objectives of Materials Management

• Maximize the use of the firm’s resources.• Provide the required level of customer

service.• Help identify the products and services that

can be best obtained externally.• Develop, evaluate, and determine the best

supplier, price, and delivery for those products and services.

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Why study Materials Management?

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Importance of Materials Management

• Usually largest component of cost

• Often largest component of inventory

• Necessary component of best customer service

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Percentage of Sales on P/OM Function

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Jobs in the U.S.

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Make/Buy Considerations

• lower production cost

• unsuitable suppliers

• assure adequate supply

• utilize surplus labor and make a marginal contribution

• obtain desired quantity

• remove supplier collusion

• obtain a unique item that would entail a prohibitive commitment from the supplier

• lower acquisition cost

• preserve supplier commitment

• inadequate capacity

• reduce inventory costs

• ensure flexibility and alternate source of

supply

• product improvements may be difficulty because it is a sideline

Reasons for Making Reasons for Buying

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The Purchasing Focus

Materials Management-High transportation cost-High inventory costs

Supply Management-High costs-Scarcity: national or international

Source Management-Unique items-Custom-made items-High technology items

Purchasing Management-Commodity items-Standard products

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Organizational Changes

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21st Century Supply Chain Excellence

ResponsivenessFlexibility

BestCost

HOW?

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21st Century Supply Chain Excellence

JITGlobalSupply

LeverageInformation Systems

Inventory ManagementLogistics

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Traditional Material and Order Flow

D D D

MROInventory

WIPInventory

Work Orders

Production InventoryControl

Order Entry

Orders from distributors

Purchasing

Suppliers/Vendors

Transportation

IncomingInspection

Customers

Distributors/Retail

Finished GoodsInventory

QualityControl

RawMaterial

Inventory

Conversion

TransportationReceiving

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Supply Chain Inventory Perspective

Raw FGI Raw FGI

SuppliersProviding Current

Products &Services

Customers

Feedback Feedback

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Supply-Production-Distribution System

SUPPLIER

ManufacturerDistribution System

CUSTOMER

Physical Supply

Manufacturing Planning and Control

Physical Distribution

Raw Materials Processing Finished Goods

Flow of Demand and Design Information

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Wealth Creation

• Where does wealth come from?– Natural resources– Services– Manufacturing / production

• How can we increase our wealth?– Value-added

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What is Value Added?

The actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer. The objective is to eliminate all non-value-added activities in producing and providing a good or service.

APICS Dictionary, 8th

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Conflicts in Traditional Systems

• Four Main Objectives to improve Profits:– Provide best customer service

– Provide lowest production costs

– Provide lowest inventory investment

– Provide lowest distribution costs

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Conflicts in Traditional Systems

• Is there any conflict in the objectives of best customer service, lowest production costs, and lowest inventory investment? Why?

• How can the conflicts be managed?

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Conflicts in Traditional Systems

Marketing• Maintain high

inventories

• Interrupt production runs

• Create extensive and costly distribution system

Finance• Reduce inventory

• Decrease plants and warehouses

• Use long production runs

• Manufacture to customer order

Production• Make long

production runs

• Maintain high inventories of raw materials and WIP

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Objectives of Materials Management

• Maximize use of the firm’s resources– Manufacturing Planning and Control

• Provide required level of customer service– Customer service means being able to

provide the customer the right quality, quantity, time, place, price

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Manufacturing Planning & Control

• Production Planning – Forecasting– Master Planning– MRP– Capacity Planning

• Implementation & Control• Inventory Management

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Manufacturing and Control System

• 5 Inputs• Bill of Material

– Describes components used to make the product– Describes subassemblies at various stages

• Process Specifications– Operations & Sequence required to make the product– Equipment and accessories required– Standard time required to perform each operation

• Time needed to perform operations• Available facilities• Quantities required

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Physical Supply/Distribution

• Activities include

- Transportation

- Distribution Inventory

- Warehousing

- Packaging

- Materials Handling

- Order Entry

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Entry Careers in Mat’ls Mgt.

• Production / inventory control (schedulers, expeditors, mat’ls analysts)

• Info. system development

• Purchasing (expeditors, asst. buyers)

• Quality management (inspectors, quality system coordinators)